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Sri Lanka rupee steady; bond sale probe weighs

Sri Lanka rupee steady; bond sale probe weighsCOLOMBO: Sri Lankan rupee forwards ended steady on Wednesday after falling in two sessions on moral suasion by the central bank amid importer dollar demand, while concerns over a government probe into bond sales since 2012 hurt sentiment, dealers said.

Sri Lanka has launched a probe into allegations of corruption in government bond sales held by the central bank since 2012, the prime minister said on Tuesday, after opposition parties called for an independent investigation into a February bond auction.

Prime Minister Ranil Wickremesinghe said on Tuesday that the central bank had raised funds through private placement under the former government and that “parcels of government bonds were handed out to selected individuals on a favoured basis”.

The central bank said in a statement on Wednesday that Governor Arjuna Mahendran would be on leave during the period of inquiry into the 30-year treasury bond issuance.

Actively-traded two-week rupee forwards ended steady at 134.00/134.10. The central bank prevented trades in two-week forwards below 134.00 via moral suasion, dealers said.

The one-month forwards ended steady at 134.40/50 per dollar.

“There is importer (dollar) demand, but no real sellers as they expect the rupee to fall further,” said a currency dealer asking not to be named.

Before the market opened, the central bank kept key policy rates steady at record lows for a 14th straight month as expected, and said the low interest rate environment is expected to continue benefiting from lower inflation.

The central bank also prevented a fall in the spot rupee and one-week forwards at 132.90/133.20 and 133.60/75, respectively, within the limits set by it.

Central bank officials were not available for comment.

Copyright Reuters, 2015

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